NEW YORK, Jan. 25 /PRNewswire/ -- Standard & Poor's today
affirmed its double-'A'/'A-1'-plus counterparty
credit and financial strength ratings on Protective Life Insurance Co.
(Protective). At the same time, Standard & Poor's affirmed its
double-'A' financial strength ratings on Empire General Life
Assurance Corp., Protective Life and Annuity Insurance Co., and West
Coast Life Insurance Co., which are Protective's explicitly
supported subsidiaries. In addition, Standard & Poor's affirmed
its single-'A' senior unsecured debt and
triple-'B'-plus preferred stock ratings on Protective's
parent, Protective Life Corp. The outlook is stable.

The affirmations reflect Protective's very strong and
well-diversified business position, extremely strong capitalization,
very strong earnings and liquidity, strong investment portfolio with
minimal credit risk, and adequate financial flexibility. Partially
offsetting these positive factors is Protective's heavy reliance on
reinsurance, which might restrict its pricing flexibility, and its
above-average exposure to interest rate risk from its large proportion
of MBS (24% of invested assets). Standard & Poor's does not
expect any impact on the rating because of the recent change of chief
executive officer.

Major Rating Factors:

-- Protective has a very strong and diversified business profile,
with a solid position in the individual life, annuity, guaranteed
investment contract (GIC), and credit life markets. A profitable
acquisition line of business that acquires in-force blocks of policies
and small insurance companies complements these businesses. Most of the
growth has been in product lines that are considered commodity-like
products--such as term life insurance and fixed annuities--or from
opportunistic line of business, such as stable-value products or
acquisitions of life insurance blocks.

-- Operating performance is considered very strong based on a
Standard & Poor's consolidated GAAP earnings adequacy ratio of
292%. The group demonstrated a track record of positive net income
growth in the last four years because of careful expense management,
tight underwriting, and above- average investment return. On the other
hand, ROE has declined to 12% as of Sept. 30, 2001, compared with 17% in
1997. In addition, the company has well- diversified returns but is also
very reliant on reinsurance. Standard & Poor's expects earnings
to grow about 10% in 2002 because of the new acquisitions, the exit of
the dental business, and improvement in the diversification of earnings.
ROE is expected to be in the 12%-13% range as the company spends more
capital in acquisitions.

-- Capitalization is extremely strong and enhanced by
Protective's access to the capital markets. On a consolidated
basis, the group's capital adequacy ratio, based on Standard &
Poor's model, was 232% at year-end 2000 and is expected to remain
stable in 2001 despite the use of outside capital to make three
acquisitions: Standard Life Insurance Co., Inter-State Insurance Co.,
and First Variable Life Insurance Co. As of Sept. 30, 2001, the company
reported a debt-plus-preferred to capital ratio of 30% and interest
coverage of 7.7 times (x), which are acceptable for the current rating
level.

-- Liquidity is very strong, with a Standard & Poor's
liquidity ratio of 237% at year-end 2000. Liquidity is enhanced by the
company's stringent asset/liability management and product
characteristics that deter early withdrawal.

-- Protective's investment portfolio is viewed as strong.
Investment performance is above average, and invested assets are of high
quality, with an adequate duration match between its asset and
liability. Protective has some exposure to interest rate risk, as a
substantial proportion of assets are invested in MBS (24% of invested
assets) and commercial real estate, with 23% of its assets in commercial
mortgages. The company reduces this exposure somewhat through
diversification, excellent risk management, and the implementation of a
hedging program. As a result, Protective has very little exposure to the
Enron Corp. and Kmart Corp. bankruptcies.

Protective Life Insurance Co. Empire General Life Assurance Corp.,
Protective Life and Annuity Insurance Co., and West Coast Life Insurance
Co. are Security Circle insurers, which means that they voluntarily
underwent Standard & Poor's most comprehensive analysis and
were assigned ratings in one of the top four categories for financial
security.

OUTLOOK: STABLE

In the next few years, Standard & Poor's expects
capitalization to remain very strong, with a Standard & Poor's
capital adequacy ratio of at least 170%. Sales in all the divisions are
expected to increase 10% or more annually as the company continues to
growth in its nontraditional distribution channels. GAAP ROA is expected
to be in excess of 200 basis points as the new acquisition start to
contribute to the bottom line and the company exits the less-profitable
business. In addition, liquidity is expected to remain very strong.
Financial leverage ratios are expected to remain appropriate for the
company's rating category, with interest coverage of 7x-10x and
debt-plus-preferred leverage of about 30%.